Dateline: October 28 2027
Since the US and EU regulators pulled the fangs out of the FAANGs in a co-ordinated move two months ago, there is a new sense of urgency and optimism in the world’s tech hubs. The FAANGs, originally comprising the five most dominant US tech companies — Facebook (now Meta), Apple, Amazon, Netflix (replaced by Nvidia) and Google (now Alphabet) — received their marching orders from the Federal Trade Commission in a move many see as a warning to the industry overall to “grow and become huge, but don’t become so dominant you kill your competition”. Microsoft didn’t escape either.
China clipped the wings of their dominant tech companies some years ago, and it was only a matter of time before US and EU regulators followed suit, but it still sent shock waves through the tech industry and the markets. Billions of dollars were wiped off their market caps and some analysts went as far as calling it “the new financial crisis”.
Pat Brown, founder of White Pebble Inc, candidly put it: “What do you expect? Now we must invest in companies that aren’t built to be as good as they can be.” Brown might have a point, but for investors, the opposite seems to be true. In the early 2020s, many large corporations spun off divisions into independent companies, unlocking billions and proving that small and nimble parts can be more valuable than one big slow-moving whole. Judging from last month’s market reactions, it looks like this might be true also for the old FAANGs.
For the start-up scene, the FAANG break-up has already — after just these few months — heralded a new era. Several small start-ups, previously struggling in their competition against a FAANG behemoth, are now attracting new interest and fresh buckets of capital. The old “plug a hole for the FAANGs” business ideas are now looking at initial public offerings to become paid-for plug-ins rather than being bought up and becoming a nameless feature.
There is a new wind sweeping over the world’s tech start-ups, one of renewed optimism and unlimited possibilities!
• First published on Mindbullets on October 31 2024.
The Magnificent Seven blow out
Dateline: February 3 2028
The wild ride of the US tech giants has begun to falter. The “Magnificent Seven” biggest companies — Microsoft, Apple, Alphabet, Amazon, Nvidia, Meta and Tesla — have all enjoyed spectacular growth over the last five years, but now they’re running out of steam. And into headwinds.
Part of the problem is their sheer size. When you’re collectively almost 35% of the market index investors get nervous as one bad quarter can send the whole exchange reeling, with drastic domino effects. It’s hard to avoid having all your eggs in one basket when the best eggs are the entire basket.
The Magnificent Seven have also been victims of their own success and inflated expectations. Market caps and share prices don’t reflect current reality; they’re always a measure of expectations and future earnings. As Tesla discovered, you can only grow unit volumes by 50% per year for so long; then you hit diminishing returns and market saturation. Eventually you run out of new customers.
Constant innovation is the only way to keep charging ahead, and the US tech sector has outshone Europe and Asia in this regard. The big tech groups lead the field and have the financial muscle to invest in moonshots, putting the US in a league of its own. But innovation has its hurdles — think blockchain or metaverse. And no-one is immune to global headwinds and geopolitical shocks.
The tech surge of recent years was fuelled by artificial intelligence (AI), and hopes for exponential returns in terms of productivity, performance and innovative spin-offs that AI would deliver, or enable. Which it has, to be fair. But AI has also disappointed, and so-called general AI or human-level intelligence seems a long way off, and may be fraught with all sorts of issues. The AI boom has run its course.
As the Magnificent Seven stumble we’re left to wonder: what will be the next big thing, and who will take the lead?
• First published on Mindbullets on February 1 2024.
• Despite appearances to the contrary, Futureworld cannot and does not predict the future. The Mindbullets scenarios are fictitious and designed purely to explore possible futures, and challenge and stimulate strategic thinking.
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